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Mega Corporation Pipelines: A Postmerger Analysis
Decision Resources, Inc., Oct 2005, Pages: 18
An analysis of the pipelines of four 'mega corporations' that emerged during the first half of the decade-AstraZeneca, GlaxoSmithKline, Pfizer, and Sanofi-Aventis-shows that although spending on R&D increased significantly between 1999 and 2004, the number of new chemical entities in late-stage research has declined for all four mega corporations. How successful has the pipeline enhancement process been in practice?
This report examines the pipelines of the four mega corporations to see what lessons can be learned. We seek to determine the impact that the megamergers have had on pipelines-whether mergers have resulted in a greater 'breadth' of activity across therapy areas and increased productivity or whether the amalgamation of pipelines has had a deleterious effect on R&D output. The question is vital for these corporations because their profitability over the coming decades will depend, to a considerable extent, on the ability of their R&D operations to bring new drugs to market.
Business Implications
- An analysis of the pipelines of four pharmaceutical 'mega corporations' that emerged during the first half of the decade—AstraZeneca, GlaxoSmithKline (GSK), Pfizer, and Sanofi-Aventis—shows that although spending on R&D increased significantly between 1999 and 2004, the number of new chemical entities (NCEs) in late-stage research declined for all four corporations. Companies are faced with the choice of either increasing R&D spend to achieve premergerlevels of late-stage product throughput or maintaining current levels of late-stage products in development, accepting that this reduces the prospective number of agents that may be brought to market.
- The convergence of companies' R&D efforts on the same indications, combined with an increasingly difficult regulatory environment, suggests that the mega corporations will encounter difficulties in bringing sufficient numbers of NCEs to market to replace revenue streams in the 2010s. These companies will therefore become more aggressive in their late-stage and marketed-product acquisition activities.
- Evidence suggests that large-scale mergers can be unproductive, or, at best, have a neutral effect on R&D creativity and productivity. Pipeline supplementation by acquisition of specific product lines or research interests in particular therapy areas appears to be the most productive route forward for companies seeking to expand and/or diversify their research activities.
- Two models of product sourcing have developed that have considerable implications for the funding of research companies; these models are exemplified by GSK's 'arm's length' research collaborations and Pfizer's assumption of direct control of external research assets. Product throughput during the next five years should indicate which of the two models is more successful.
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